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As U.S. companies expanded globally in the 1970s and 1980s, they started ignoring their hometowns, hurting America and putting companies’ long-term profits at risk, Jan Rivkin, professor at Harvard Business School, told a room full of business leaders at the Forbes-Rabobank Leadership conference in New York on Thursday.

“Historically, when business was rooted in local areas, they had very strong incentives to make sure the schools, suppliers, infrastructure and pools of skilled labor in those locations were very strong,” he said. “But when you can move from place to place, incentives for reinvesting in any place are going to decrease.”

The result is that companies’ profits have risen thanks to global success while American workers have struggled to keep up.

Rivkin displayed the following graph showing that worker compensation began diverging from worker productivity in the 1970s. The gap continues to grow today.

Of course, several factors led to decreasing compensation relative to worker productivity, including improvements in technology and rising education levels abroad. But one key factor, Rivkin argued, is that middle class Americans couldn’t adapt quickly enough to the changes in the economy because America had not invested enough of its resources in education.

He conceded that there has not been any conclusive data-driven study that has proved that globalizing companies have abandoned investments at home.

As the American middle class fell behind, society started living beyond its means, masking the decline. The U.S. government began making unsustainable promises, particularly in healthcare. Banks wrote unrealistic loans, and average people started taking on more debt than they could afford.

After two wars, a financial crisis and years of expanding government, Washington has become strapped for cash and divided over where to reinvest its limited resources.

Rivkin showed another graph displaying how U.S. government debt as a share of GDP dropped after World War II but then rose again in the mid-1970s, when many companies began offshoring their operations.

“Ultimately you’ve got to draw from the commons," Rivkin said. If those commons are depleted, companies are going to be less profitable over time.”

But there is hope. As the federal government flounders, states, cities and some businesses are stepping up with new, smart ways to retrain workers and build a more competitive American middle class.

Wire manufacturer , for example, couldn’t find enough workers for its manufacturing plant in Carollton, Georgia. The local schools, meanwhile, couldn’t keep students from dropping out.

So the company partnered with the local schools to bring the most at-risk students into the factory, where they earn both money and school credit.

The business now chooses from a crop of already-trained workers every year. And 480 students who might not have graduated otherwise now have diplomas through the program.

“Many companies had a home,” Rivkin said. “They came back home and said this place is run down. It all hinges on what happens next. Do they fix up the place or go on longer vacations?”